Islamic and Conventional equity market movements after the financial crisis: Evidence from newly launched MSCI Indices

Hafiz Hoque, Sarkar Kabir, El Khamlichi Abdelbari, Viktor Manahov

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

This paper examines the relationship between the Islamic and conventional equity indices by employing the newly launched MSCI Global Islamic Indices which began in 2008. We argue for the case of cointegration supported by fundamental, category and habitat theories, and against cointegration due to the fundamental difference between Islamic and conventional stocks in terms of debt ratio, accounts receivable and interest bearing securities. We find Islamic and conventional equity markets move together despite fundamental differences and given that market microstructure, dividends, capital gains, taxation and governance systems are different across the markets. Almost simultaneous movement of the permanent and cycle components of Islamic and mainstream equity indices has been supported by the application of the Beveridge Nelson (BN) time series decomposition technique. Theoretically, the volatility of Islamic equities should be lower due to their low leverage ratio. Surprisingly, permanent parts of the Islamic indices appear to be more volatile during the crisis period and less volatile during the post-crisis period.
Original languageEnglish
Pages (from-to)217 - 252
Number of pages36
JournalFinancial Markets, Institutions & Instruments
Volume25
Issue number4
Early online date12 Oct 2016
DOIs
Publication statusPublished - Nov 2016
Externally publishedYes

Fingerprint

Financial crisis
Equity markets
Equity
Cointegration
Accounts receivable
Dividends
Decomposition
Capital gains taxation
Habitat
Leverage ratio
Debt ratio
Governance
Market microstructure

Keywords

  • MSCI Global Islamic Indices
  • time series decomposition
  • Cointegration
  • Financial Crisis

Cite this

Islamic and Conventional equity market movements after the financial crisis : Evidence from newly launched MSCI Indices. / Hoque, Hafiz ; Kabir, Sarkar; Abdelbari, El Khamlichi; Manahov, Viktor.

In: Financial Markets, Institutions & Instruments, Vol. 25, No. 4, 11.2016, p. 217 - 252.

Research output: Contribution to journalArticle

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